PricewaterhouseCoopers: PPACA Exchanges May Add Sales, Headaches

The new health insurance exchanges created by the Patient Protection and Affordable Care Act of 2010 (PPACA) could handle $200 billion in premium revenue per year by 2019.

Consultants at PricewaterhouseCoopers L.L.P., New York, have included that forecast in a look at how the exchange program might affect at insurers.

If PPACA takes effect as written and works as supporters hope, the act will create a system of state-supervised health insurance distribution exchanges that will help individuals and small groups buy health coverage using a new system of tax credit-based subsidies starting in 2014.

The District of Columbia, 49 states and 4 territories have accepted preliminary exchange planning grants, and more than half of the jurisdictions have taken additional steps toward setting up exchange programs, according to the U.S. Department of Health and Human Services (HHS).

The only state that has taken no officials steps toward looking at the exchange program is Alaska.

A state can let several exchanges operate within its borders, set up one exchange, join a multi-state exchange consortium, or let the federal government provide exchange services for its residents.

To become a "qualified health plan" (QHP) eligible to participate in an exchange, a health plan must offer a minimum level of benefits and meet other federal standards.

The exchanges are supposed to start certifying the QHPs in October 2012, according to the PricewaterhouseCoopers consultants, and those QHPs could split about $60 billion in revenue in 2014, the PricewaterhouseCoopers consultants say.

Only about one-sixth of health insurance company executives polled told PricewaterhouseCoopers that they are certain their companies will stay out of the exchange system. One-third of the executives said their companies are still deciding whether to try to participate, and about half have decided to try to participate.

PricewaterhouseCoopers found health insurance company executives are worried about the risk of adverse selection, and about the possibility that some exchanges will use an "active purchaser" carrier selection approach to keep higher cost carriers off the exchange.

"Insurers are hoping states opt for an open marketplace," the consultants say.

Health insurers also are facing the reality of having to educate many consumers who may be newly eligible for health insurance and know little about health insurance.

PricewaterhouseCoopers found when it surveyed consumers that only 18% of the consumers with incomes low enough that they would qualify for exchange subsidies know that they would qualify for subsidies.

Insurance executives told PricewaterhouseCoopers that they expect the exchanges to cut the volume of sales coming from brokers by about 20%.

"Brokers who have established relationships will likely retain them during the early years of [health insurance exchanges]," the consultants say.

- Allison Bell

Other health insurance exchange coverage from National Underwriter Life & Health: